Bill Gates, Sr.: The Rich Must Pay More Taxes

Bill Gates, Sr., a retired attorney in Washington state, supports a ballot initiative that would require the state’s highest earners — including himself and his son — to pay an income tax. Currently, the state does not collect personal income taxes.

The father of billionaire Microsoft founder Bill Gates, Jr., believes that the poor pay too much tax, and that the rich don’t pay enough. Washington’s school system, which is a catalyst for future economic growth in the high-tech state, suffers from too little funding because the wealthy aren’t paying their fair share, according to Gates. His 1098 initiative — an income tax on adjusted earnings that exceed $400,000 a year per couple or $200,000 for an individual — is drawing protest from Washington business leaders, as well as anti-tax groups.

Initiative 1098 would give tax credits to approximately 80 percent of Washington-based businesses and slash the state share of property taxes by 20 percent for businesses and homeowners. According to critics, the legislation would harm the economy by taxing the earnings of people who own the businesses — money that would be used to put people back to work. The opposition’s Defeat 1098 campaign believes that an income tax on 38,400 of the state’s highest earners would take away vital competitive advantages and drive away entrepreneurs. Even Governor Chris Gregoire’s Commerce Department has publicized Washington’s lack of an income tax in statements about the state’s business climate.

Gates considers Washington state’s tax system to be “dramatically regressive”, something that was proved in 2002 when he led a commission created by the Legislature to study the state tax system. The commission recommended replacing the sales tax or property tax with an income tax that would rebalance the load. Gates cited data gathered by the national Institute on Taxation and Economic Policy that show Washington’s poorest 20 percent pay 17 percent of their income in sales, property and other taxes. By contrast, the wealthiest one percent pays less than four percent.

The initiative would impose a state income tax on individuals earning more than $200,000 and couples earning upwards of $400,000. In other words, single people would pay a five percent tax on income over $200,000 and nine percent tax if they earn more than $500,000. Couples would pay five percent over $400,000 and nine percent if they earn a combined income that exceeds $1 million.

“It’s not a matter of picking on someone,” Gates said. “It’s a matter of correcting to some extent a bad historic situation and arguing — I think absolutely persuasively — that this is a proper source for a serious financial shortfall in our operations, namely the public education system.”

Gates is joined by Berkshire-Hathaway CEO Warren Buffett in calling for higher taxes on the wealthy. President Obama supports “the Buffett Rule”, a guiding principle to ensure that the rich pay as large a percentage of their income as the middle class. Some millionaires insist that Buffett doesn’t speak for them. “There is more of a difference between my financial position as a multi-millionaire and Buffett’s than there is between mine and a guy that makes minimum wage,” one CNN Money reader said. “Why am I grouped with him and why does he feel he can speak for me?”

Just 24 percent of millionaires said higher taxes on large incomes is the optimal solution, according to a survey from Spectrem Group, a research firm specializing in the finances of affluent Americans. The largest group of millionaires, 44 percent, believe that a flat-rate tax across all income brackets is the fairest system.